Patisserie Valerie will be forced to cease trading if an immediate injection of capital isn't made, with 2,500 jobs at risk.
The chain's parent company Patisserie Holdings has said that "without an immediate injection of capital, the directors are of the view that that is no scope for the business to continue trading in its current form".
The statement follows the revelation that Patisserie Holdings had uncovered a £1.14m unpaid tax bill and been issued with a winding up petition.
On Wednesday 10 October it suspended trading in its shares and suspended chief financial officer Chris Marsh. It said at the time that it was undertaking an investigation into "significant, and potentially fraudulent, accounting irregularities" and "a potential material mis-statement of the company's accounts".
It has now provided an update having investigated the tax bill and winding-up petition, which only came to light this week.
The update said: "The board has now reached the conclusion that there is a material shortfall between the reported financial status and the current financial status of the business.
"Without an immediate injection of capital, the directors are of the view that that is no scope for the business to continue trading in its current form."
The group employs some 2,500 people in 206 stores across five brands: Patisserie Valerie, Druckers - Vienna Patisserie, Philpotts, Baker & Spice and Flour Power City.